Friday, March 06, 2009

Joe Nocera on Daily Show explains AIG

Nocera was on Wednesday night. You can watch the clip here. Stewart raises CNBC/Rick Santelli cleverly during the course of the interview. Nocera also had a very good column on the AIG matter this past weekend which should explain it well to you if you're interested in why AIG is central to the financial crisis and how it got to its current dire situation. Here's some of the lead-in commentary:

So far the government has thrown $150 billion at the company, in loans, investments and equity injections, to keep it afloat. It has softened the terms it set for the original $85 billion loan it made back in September. To ease the pressure even more, the Federal Reserve actually runs a facility that buys toxic assets that A.I.G. had insured. A.I.G. effectively has been nationalized, with the government owning a hair under 80 percent of the stock. Not that it’s worth very much; A.I.G. shares closed Friday at 42 cents.

...

...because of A.I.G.’s dubious business practices during the housing bubble it pretty much has the world’s financial system by the throat.

If we let A.I.G. fail, said Seamus P. McMahon, a banking expert at Booz & Company, other institutions, including pension funds and American and European banks “will face their own capital and liquidity crisis, and we could have a domino effect.” A bailout of A.I.G. is really a bailout of its trading partners — which essentially constitutes the entire Western banking system.

Nocera goes on to explain the mechanics of the scams pretty clearly. All very disturbing stuff.